QUESTION ONE [30]
Discuss price floors as a form of government intervention in a free market. Use examples to motivate your answer. (8)
Question 1.2 is based on the diagram below representing the free market for a good.
How does this free market adjust if it is in the shaded green area. (5)
Demonstrate that a complete outward shift of the production possibility frontier for an economy implies economic growth in the production of both the goods for that economy. Use the ONE most relevant diagram below to motivate your answer. (8)
Distinguish between the economic terms scarcity and opportunity cost. (9)
Total word Q1: 500 – 550 Words
QUESTION TWO [20]
Question 2.1 is based on the diagram below relating to elasticity and demand curves.
Between LD1 and LD2, discuss which demand curves are elastic and inelastic. Provide a motivation for your answer. (12)
Explain cross price elasticity of demand and how it can be used to define goods and services. (8)
Total word Q2: 200 – 300 Words
Get Answers on Above Questions on Economic
Answer 1: Price floors are an important form of government intervention in the free market. It is a process whereby the government sets a minimum price for a good or service and the price set is above the equilibrium price as identified by the market. The main purpose of using the price floor is to enhance the overall income level of producers so that they get fair prices for their products and services.
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